Working Papers by Charles R. Plott
# | Title | Authors | Date | Length | Paper | Abstract | |
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1448 | Using Theory, Markets and Experimental Methods to Improve a Complex Administrative Decision Process: School Transportation for Disadvantaged Students | Plott, Charles R. Stoneham, Gary Lee, Hsing Yang Maron, Travis | 02/25/2021 | 44 | sswp1448_FEB2021.pdf | The paper studies structural inefficiencies of administrative decisions demonstrated in an example from the growing government service sector. The provision of school transportation to disadvantaged children touches social concerns and regulations related to classical conditions of limited competition. The decision process is partitioned into key economic functions related to the challenges faced by the government when dealing with environments in which theory predicts market failures. Theories drawn from public choice theory and theories of auctions suggest policy changes that were experimentally tested in the challenging environment. Field data demonstrate the new processes produced improved allocations. Subsequent laboratory tests demonstrate the success can be attributed to the principles used in the theory and demonstrate a robust link connecting efficient behaviors observed in laboratory experiments and behaviors found in field events. | |
1447 | General Equilibrium Methodology Applied to the Design, Implementation and Performance Evaluation of Large, Multi-Market and Multi-Unit Policy Constrained Auctions | Plott, Charles R. Cason, Timothy N. Gillen, Benjamin J. Lee, Hsing Yang Maron, Travis | 01/13/2022 | 62 | sswp1447_revJAN2022.pdf | The paper reports on the methodology, design and outcome of a large auction with multiple, interdependent markets constructed from principles of general equilibrium as opposed to game theoretic auction theory. It distributed 18,788 entitlements to operate electronic gaming machines in 176 interconnected markets to 363 potential buyers representing gaming establishments subject to multiple policy constraints on the allocation. The multi-round auction, conducted in one day, produced over $600M in revenue. All policy constraints were satisfied. Revealed dynamics of interim allocations and new statistical tests provide evidence of multiple market convergence hypothesized by classical theories of general equilibrium. Results support the use of computer supported, "tâtonnement–like" market adjustments as a reliable empirical processes and not as purely theoretical constructs. | |
1442 | Fake News, Information Herds, Cascades and Economic Knowledge | Butkovich, Lazarina Butkovich, Nina Plott, Charles R. Seo, Han | 03/21/2019 | 24 | sswp1442.pdf | The paper addresses the issue of “fake news” through a well-known and widely studied experiment that illustrates a possible science behind the phenomenon. Public news is viewed as an aggregation of decentralized pieces of valuable information about complex events. Such systems rely on accumulated investment in trust in news sources. In the case of fake news, news source reliability is not known. The experiment demonstrates how fake news can destroy both the investment in trust and also the benefits that news provides. | |
1435 | Tick Size, Price Grids and Market Performance: Stable Matches as a Model of Market Dynamics and Equilibrium | Plott, Charles R. Roll, Richard Seo, Han Zhao, Hao | 01/08/2018 | 58 | sswp1435_r_X1x1ZD3.pdf | This paper reports experiments motivated by ongoing controversies regarding tick size in markets. The minimum tick size in a market dictates discrete values at which bids and asks can be tendered by market participants. All transaction prices must occur at these discrete values, which are established by the rules of each exchange. The simplicity of experiments helps to distinguish among competing models of complex real-world securities markets. We observe patterns predicted by a matching (cooperative game) model. Because a price grid damages the equilibrium of the competitive model, the matching model provides predictions where the competitive model cannot; their predictions are the same when a competitive equilibrium exists. The experiment examines stable allocations, average prices, timing of order flow and price dynamics. Larger tick size invites more speculation, which in turn increases liquidity. However, increased speculation leads to inefficient trades that otherwise would not have occurred. | |
1432 | A Testbed Experiment of a (Smart) Marked Based, Student Transportation Policy: Non Convexities, Coordination, Non Existence | Lee, Hsing Yang Maron, Travis Plott, Charles R. Seo, Han | 01/11/2018 | 41 | sswp1432.pdf | The paper develops and studies a decentralized mechanism for pricing and allocation challenges typically met with administrative processes. Traditional forms of markets are not used due to conditions associated with market failure, such as complex coordination problems, thin markets, non-convexities including and zero marginal cost due to lumpy transportation capacities. The mechanism rests on an assignment process that is guided by a computational process, enforces rules and channels information feedback to participants. Special, testbed experimental methods produce high levels of efficiency when confronted by individual behaviors that are consistent with traditional models of strategic behavior. | |
1429 | Manipulation | Plott, Charles R. | 06/19/2017 | 23 pages | sswp1429.pdf | Systematic opportunities for manipulation emerge as a by-product of the structure of all group decision processes. Theory suggests that no process is immune. The study of manipulation provides principles and insights about how parts of complex decision systems work together and how changes in one part can have broad impact. Thus, manipulation strategies are derived from many features of voting processes. Often they are the product of changes in the decision environment, including rules, procedures and influence on others, in order to achieve a specific purpose. The issues and variables go beyond individual's own voting strategy within a specific setting and whether or not preferences are truthfully revealed – an issue often studied. Hopefully, the insights can lead to avenues for improvements to decision processes and thus, produce a better understanding of process vulnerabilities. | |
1412 | Two Information Aggregation Mechanisms for Predicting the Opening Weekend Box Office Revenues of Films: Box Office Prophecy and Guess of Guesses | Court, David Gillen, Benjamin J. McKenzie, Jordi Plott, Charles R. | 02/22/2016 | 52 | SSWP_1412_2017.pdf | Field tests were conducted on two new Information Aggregation Mechanism (IAM) designs. The mechanisms were designed to collect information held as intuitions about opening weekend box office revenues for movies in Australia. The principles on which the mechanisms operate and their capacity to collect information are explored. A pari-mutuel mechanism produces a predicted probability distribution over box office amounts that is, with the exception of very small films, indistinguishable from the actual revenues. The second mechanism is based on guessing the guesses of others and, applied under conditions incentives for accuracy are unavailable, still performs well against data. | |
1406 | Multiple Items, Ascending Price Auctions: An Experimental Examination of Alternative Auction Sequences | Kim, Dae Hyun Lee, Hsing Yang Maron, Travis Plott, Charles R. Teo, Ruijie D. | 04/13/2015 | 40 | sswp1406.pdf | The paper investigates the revenue and efficiency of different ascending price auction architectures for the sale of three items and five bidders. Four architectures are studied: two different sequences of single item auctions, simultaneous auctions with a common countdown clock, and simultaneous auctions with item specific | |
1404 | Call Market Experiments: Efficiency and Price Discovery Through Multiple Calls and Emergent Newton Adjustments | Plott, Charles R. Pogorelskiy, Kirill | 02/23/2015 | 43 | SSWP_1404.pdf | We study multiple-unit, laboratory experimental call markets in which orders are cleared by a single price at a scheduled \call". The markets are independent trading \days" with two calls each day preceded by continuous and public order ow. Markets approach the competitive equilibrium over time. The price formation dynamics operate through the ow of bids and asks congured as the \jaws" of the order book with contract execution featuring elements of an underlying mathematical principle, the Newton-Raphson method for solving systems of equations. Both excess demand and its slope play a systematic role in call market price discovery. | |
1394 | Information Transfer and Aggregation in an Uninformed Committee: A Model for the Selection and Use of Biased Expert Advice | Plott, Charles R. Llewellyn, Morgan | 08/25/2014 | 32 | SSWP_1394.pdf | A committee of five uses majority rule for decisions on two public goods. Individual committee member preferences depend on a state of nature that is unknown to the committee members but the state of nature is known to two experts who have preferences about committee decisions. Experts have no vote on the committee but provide a recommendation to the committee at the opening of a meeting. Two experts are selected who have known, opposing biases -a dyadic mechanism. The results reveal that experts do not tell the truth but committee decisions are as if committee members know what the experts know. The information transfer occurs because committee members anticipate the biases and properly infer the information held by the experts. | |
1389 | Mechanism Design with Public Goods: Committee Karate, Cooperative Games and the Control of Social Decisions through Subcommittees | Plott, Charles R. Merlob, Brian | 06/26/2014 | 47 | SSWP_1389.pdf | The paper explores organizations designed to influence a group to choose specific alternatives from a set of possible choices. The perspective is that of an administrator that has personal objectives not shared by the group and can dictate organization but not group choice. The design works through subcommittee organization. The variables used to manipulate the group choice are the assignment of members of the subcommittees, the assignment of alternatives for subcommittee consideration (the committee charge or jurisdiction) and the rules followed during subcommittee deliberations. The model uses the core of game derived from social choice theory and cooperative games without side payments (in effectiveness form) as the principle that determines committee choices. Experiments demonstrate that for a fixed profile of individual preferences the variables can be varied to structure the game such that almost any alternative is a member of the core. The resulting model is a very accurate predictor of the group choice. | |
1384 | The Continuous Combinatorial Auction Architecture | Lee, Hsing-Yang Maron, Travis Plott, Charles R. | 01/21/2014 | SSWP1384_201312.pdf | |||
1383 | Public Choice and the Development of Modern Laboratory Experimental Methods in Economics and Political Science | Plott, Charles R. | 01/23/2014 | 41 pages | SSWP_1383_20140814.pdf | The paper is an account of the development of laboratory experimental methods in the early 1970s as influenced by the fields of Public Choice and Social Choice. Just a few key experiments conducted during a period when no experimental markets research was taking place, provide a bridge with the subsequent, rapid, growth of experimental economics. A new focus on public goods and externalities, as opposed to private goods traditionally used in economics experiments, required new representations of the commodity space and preference inducement methods. The importance of voting and collective decision making processes dictated the testing of equilibrium concepts from political science and cooperative game theory as opposed to the competitive equilibrium and Nash equilibria found in economics. The existence of many theories from multiple disciplines required new experimental designs and experimental tests. The Public Choice and Social Choice emphasis on comparing the performance of different types of collective decision processes induced early experiments related to institutional design and testing. | |
1367 | A Parimutuel-like Mechanism from Information Aggregation: A Field Test Inside Intel | Gillen, Benjamin J. Plott, Charles R. Shum, Matthew | 01/03/2013 | 43 | SSWP1367.pdf | Field tests of a new Information Aggregation Mechanism (IAM) developed via laboratory experimental methods were implemented inside Intel Corporation for sales forecasting. The IAM, which incorporates selected features of parimutuel betting, is uniquely designed to collect and quantize as probability distributions any dispersed, subjectively held information that might exist. The tests demonstrate the robustness of experimental results and the practical usefulness of the IAM. The IAM yields predicted distributions of future sales that are very accurate at short horizons; indeed, more accurate than Intel's official in-house forecast 59% of the time. A symmetric game model suggests why the IAM works. | |
1365 | Market microstructure design and flash crashes: A simulation approach | Brewer, Paul J. Cvitanci, Jaksa Plott, Charles R. | 12/06/2012 | 31 pages | sswp1365.pdf | ||
1364 | Misconceptions and game form recognition: Challenges to theories of revealed preference and framing (Revised) | Cason, Timothy N. Plott, Charles R. | 09/10/2012 | 40 | SSRN_Cason_Plott_Misconceptions_20140818.pdf | This study explores the tension between the standard economic theory of preference and non-standard theories of preference that are motivated by an underlying theory of framing. A simple experiment fails to measure a known preference. The divergence of the measured preference from the known preference reflects a mistake, arising from some subjects' misconception of the game form. We conclude that choice data should not be granted an unqualified interpretation of preference revelation. Mistakes in choices obscured by a possible error at the foundation of the theory of framing, can masquerade as having been produced by non-standard preferences. | |
1361 | Understanding price controls and non-price competition with matching theory | Hatfield, John William Plott, Charles R. Tanaka, Tomomi | 02/22/2012 | 5 | sswp1361.pdf | ||
1360 | Price controls, non-price quality competition, and the nonexistence of competitive equilibrium | Hatfield, John William Plott, Charles R. Tanaka, Tomomi | 07/11/2013 | 70 | sswp_1360.pdf | We investigate how price ceilings and floors affect outcomes in continuous time, double auction markets with discrete goods and multiple qualities. When price controls | |
1346 | The CMS auction: Experimental studies of a median-bid procurement auction with non-binding bids | Merlob, Brian Plott, Charles R. Zhang, Yuanzun | 04/26/2011 | sswp1346.pdf | |||
1345 | An experimental test of Marchall's basic principle of entry, volume and efficiency seeking market synamics | Plott, Charles R. Nilanjan, Roy Tong, Baojia | 04/12/2011 | sswp1345R.pdf | |||
1330 | A reverse auction for toxic assets | Armantier, Olivier Holt, Charles A. Plott, Charles R. | 08/10/2010 | sswp1330.pdf | |||
1329 | Extreme Walrasian Dynamics: The Gale example in the lab | Crockett, Sean Oprea, Ryan Plott, Charles R. | 08/10/2010 | sswp1329.pdf | |||
1321 | Endowment effect theory, subject misconceptions and enchancement effect theory: A reply to Isoni, Lommes and Sugden | Plott, Charles R. Zeiler, Kathryn | 05/04/2010 | 46 | sswp1321.pdf | ||
1302 | The nature of collusion facilitating and collusion breaking power of simultaneous ascending price and simultaneous descending price auctions | Brown, Alexander Plott, Charles R. Sullivan, Heidi Kamp | 04/01/2009 | 33 pages | sswp1302.pdf | ||
1297 | An internal fuel efficiency credit market mechanism for meeting the CAFE Standard: Internalizing a regulation caused externality | Plott, Charles R. Katz, Gabriel | 09/01/2008 | 50 pages | sswp1297.pdf | ||
1276 | Principles of continuous price determination in an experimental environment with flows of random arrivals and departures | Alton, Michael R. Plott, Charles R. | 09/01/2007 | 44 pages | sswp1276.pdf | ||
1274 | The control of game form recognition in experiments: Understanding dominant strategy failures in a simple two person "Guessing" game | Chou, Eileen McConnell, Margaret A. Nagel, Rosemarie Plott, Charles R. | 08/01/2007 | 22 pages | sswp1274.pdf | ||
1268 | Design improved parimutuel-type information aggregation mechanisms: Inaccuracies & the long-shot bias as disequilibrium phenomena | Axelrod, Boris S. Kulick, Benjamin J. Plott, Charles R. Roust, Kevin A. | 03/01/2007 | 18 pages | sswp1268.pdf | ||
1253 | Sequencing strategies in large, competitive, ascending price automobile auctions: An experimental examination | Grether, David M. Plott, Charles R. | 06/01/2006 | 28 pages | sswp1253.pdf | ||
1245 | The design and testing of information aggregation mechanisms: A Two-stage parimutuel IAM | Roust, Kevin A. Plott, Charles R. | 12/01/2005 | 41 pages | sswp1245.pdf | ||
1240 | Congestion at locks on inland waterways: An experimental Testbed of a policy of tradable priority permits for lock access | Cook, Joseph Plott, Charles R. | 11/01/2005 | 41 pages | wp1240.pdf | ||
1239 | Divergence and Convergence in Scarf Cycle Environments: Experiments and Predictability in the Dynamics of General Equilibrium Systems | Gillen, Benjamin J. Hirota, Masayoshi Hsu, Ming Plott, Charles R. Rogers, Brian W. | 10/01/2005 | 57 pages | sswp_1239_-_revised_v.2.pdf | Previous experimental work demonstrates the power of classical theories of economic dynamics to accurately characterize equilibration in multiple market systems. Building on the literature, this study examines the behavior of experimental continuous double auction markets in convergence-challenging environments identified by Scarf (1960) and Hirota (1981). The experiments provide insight into two important economic questions: (a) do markets necessarily converge to a unique interior equilibrium? and (b) which model, among a set of classical specifications, most accurately characterizes observed price dynamics? We observe excess demand driven prices spiraling outwardly away from the interior equilibrium prices as predicted by the theory of disequilibrium price dynamics. We estimate a structural model establishing that partial equilibrium dynamics characterize price changes even in an unstable general equilibrium environment. We observe linkages between excess demand in one market and price changes in another market but the sign of expected price change in a market does not depend on the magnitude of excess demand in other markets unless disequilibrium is severe. Original working paper published October 2005. | |
1230 | Asymmetries in exchange behavior incorrectly interpreted as evidence of prospect theory | Plott, Charles R. Zeiler, Kathryn | 07/01/2005 | 21 pages | wp1230.pdf | ||
1223 | Tacit collusion in auctions and conditions for its facilitation and prevention: Equilibrium selection in laboratory experimental markets | Li, Jin Plott, Charles R. | 11/01/2005 | 48 pages | sswp1223.pdf | ||
1204 | On the Microstructure of Price Determination and Information Aggregation with Sequential and Asymmetric Information Arrival in an Experimental Asset Market | Barner, Martin Feri, Francesco Plott, Charles R. | 08/01/2004 | 40 pages | wp1204.pdf | Experiments were conducted on an asset with the structure of an option. The information of any individual is limited, as if only the direction of movement of the option value known for a single period without information of the value from when movement was initiated. However, if all information of all insiders were pooled, the value of the option would be known with certainty. The results are the following: (1) Information becomes aggregated in the prices as if fully informative rational expectations operated; and (2) The mechanism through which information gets into the market is captured by a path dependent process that we term "The Fundamental Coordination Principle of Information Transfer in Competitive Markets". The early contracts tend to be initiated by insiders who tender limit orders. The emergence of bubbles and mirages in the markets are coincident with failures and circumstances that prevent the operation of the "Fundamental Principle." | |
1202 | Forced information disclosure and the fallacy of transparency in markets | Cason, Timothy N. Plott, Charles R. | 06/01/2004 | 32 pages | sswp1202c.pdf | A theory advanced in regulatory hearings holds that market performance will be improved if one side of the market is forced to publicly reveal preferences. For example, wholesale electricity producers claim that retail electricity consumers would pay lower prices if wholesale public utility demand is disclosed to producers. Experimental markets studied here featured decentralized, privately negotiated contracts, typical of the wholesale electricity markets. Two conclusions emerge: (i) such markets generally converge to the competitive equilibrium and (ii) forced disclosure works to the disadvantage of the disclosing side. Information disclosure would result in higher wholesale and thus higher retail electricity prices | |
1189 | Mental Processes & Strategic Equilibration: An fMRI Study of Selling Strategy in Second Price Auctions | Grether, David M. Plott, Charles R. Rowe, Daniel B. Sereno, Martin Allman, John M. | 06/01/2004 | 26 pages | wp1189r.pdf | This study is the first to attempt to isolate a relationship between cognitive activity and equilibration to a Nash Equilibrium. Subjects, while undergoing fMRI scans of brain activity, participated in second price auctions against a single competitor following predetermined strategy that was unknown to the subject. For this auction there is a unique strategy that will maximize the subjects' earnings, which is also a Nash equilibrium of the associated game theoretic model of the auction. As is the case with all games, the bidding strategies of subjects participating in second price auctions most often do not reflect the equilibrium bidding strategy at first but with experience, typically exhibit a process of equilibration, or convergence toward the equilibrium. This research is focused on the process of convergence. In the data reported here subjects participated in sixteen auctions, after which all subjects were told the strategy that will maximize their revenues, the theoretical equilibrium. Following that announcement, sixteen more auctions were performed. The question posed by the research concerns the mental activity that might accompany equilibration as it is observed in the bidding behavior. Does brain activation differ between equilibrated and non-equilibrated in the sense of a bidding strategy? If so, are their differences in the location of activation during and after equilibration? We found significant activation in the frontal pole especially in Brodmann's area 10, the anterior cingulate cortex, the amygdala and the basal forebrain. There was significantly more activation in the basal forebrain and the anterior cingulate cortex during the first sixteen auctions than in the second sixteen. The activity in the amygdala shifted from the right side to the left after the solution was given. | |
1188 | Production, trade, prices, exchange rates and equilibration in large experimental economies | Noussair, Charles N. Plott, Charles R. Riezman, Raymond G. | 11/01/2003 | 41 pages | wp1188.pdf | ||
1181 | Bidders' choice auctions: Raising revenues through the right to choose | Goeree, Jacob K. Plott, Charles R. Wooders, John | 08/01/2003 | 13 pages | wp1181.pdf | Sales of multiple real-estate properties are ften conducted via a sequence of ascending auctions, giving the winner at each stage the right to choose one of the available lots. We show that when bidders are risk averse, such "bidders' choice" auctions raise more revenues than standard simultaneous or sequential ascending auctions. We also report the results of laboratory experiments to investigate the effectiveness of bidders' choice auctions vis-a-vis the simultaneous ascending auction. The revenue-superiority of the bidders' choice auction is corroborated by the experimental data. Finally, we compare observed bidding behavior in the experiments with theoretically predicted bids to estimate a common risk aversion parameter from the data. | |
1180 | Aging and decision making: A comparison between neurologically healthy elderly and young individuals | Kovalchik, Stephanie Camerer, Colin F. Grether, David M. Plott, Charles R. Allman, John M. | 05/27/2005 | sswp1180c.pdf | |||
1156 | Principles of network development and evolution: An experimental study (formally - Networks: An Experimental Study) | Plott, Charles R. Callander, Steven | 07/01/2002 | wp1156R.pdf | |||
1155 | The Simultaneous, Ascending Auction: Dynamics of Price Adjustment in Experiments and in the U.K. 3G Spectrum Auction | Plott, Charles R. Salmon, Timothy | 07/01/2002 | wp1155.pdf | |||
1137 | Asset Bubbles and Rationality: Additional Evidence from Capital Gains Tax Experiments | Lei, Vivian Noussair, Charles N. Plott, Charles R. | 06/01/2002 | wp1137.pdf | |||
1136 | Information Aggregation in Double Auctions: Rational Expectations and the Winner's Curse | Guarnaschelli, Serena Kwasnica, Anthony M. Plott, Charles R. | 06/01/2002 | wp1136.pdf | |||
1132 | The Willingness to Pay/Willingness to Accept Gap, The "Endowment Effect" and Experimental Procedures for Eliciting Valuations | Plott, Charles R. Zeiler, Kathryn | 04/01/2002 | wp1132.pdf | |||
1131 | Information Aggregation Mechanisms: Concept, Design and Implementation for a Sales Forecasting Problem | Plott, Charles R. Chen, Kay-Yut | 03/01/2002 | wp1131.pdf | |||
1107 | The FCC Rules For The 700MHZ Auction: A Potential Disaster | Plott, Charles R. | 11/01/2000 | 16 pages | wp1107.pdf | ||
1086 | Global Instability in Experimental General Equilibrium: The Scarf Example | Anderson, Christopher M. Granat, Sander Plott, Charles R. Shimomura, Ken-Ichi | 03/01/2000 | ||||
1082 | A Smart Market Solution to a Class of Back-Haul Transportation Problems: Concept and Experimental Testbeds | Brewer, Paul J. Plott, Charles R. | 02/01/2000 | ||||
1079 | On the Behavioral Foundations of the Law of Supply and Demand: Human Rationality vs. Randomness | Brewer, Paul J. Huang, Maria Nelson, Brad Plott, Charles R. | 12/01/1999 | 30 pages | wp1079.pdf |